Hanson shuts 4 brick factories; says H1 2006 could be ‘difficult’

Hanson shuts 4 brick factories; says H1 2006 could be ‘difficult’

	Published : Thu, 22 Dec 2005 02:05 By : Amy Watts Print this Story

LONDON: Building materials supplier Hanson forecast an 11 to 13 percent profit before tax for 2005 but warned that profits may decline in the first half of 2006 as UK demand had weakened while energy costs had soared.

At around £420 million, profits for end-December (£377.1 million in 2004) would be in line with analysts’ expectations. Most analyst forecast pretax profit for 2005 at £420 million and for 2006 at £450 million. Yesterday’s trading statement made Hanson share prices slide 1.4 percent to 614-1/2 pence (its biggest decline for two months) pushing it down among FTSE 100’s biggest losers for the day.

The company’s numbers for 2005 are noticeably lower than last year’s. The “difficult” second half this year had led to year-over-year declines in volume sales of aggregates as well as ready-mixed concrete, the company said. Demand for bricks is also expected to decline 10 percent this year. It is certain to reflect in the full year earnings of Hanson which enjoys the largest share in the UK brick market.

The shrinking demand for bricks was due to homebuilders building fewer detached homes and focusing more on apartment blocks for first time buyers. Apartment blocks require more steel and cement and fewer bricks. The company consequently had to shut down production at four of its brick factories until January end.

The expected gains for this year will be largely due to cost cuts, proceeds from property sales and more significantly from strong performances at Hanson’s US business. As the US housing boom continues into its fourth year, prices of building materials have kept pace with rising real estate prices. An 8 percent hike in the price of aggregates and 10 percent across other building materials buffered declining group volumes and rising costs. Its North America operations alone have contributed 53 percent to profits and 44 percent to group turnover in the first half for this London-based group.

Besides brick, the company also produces concrete products, asphalt, crushed rock, sand and gravel.

Full year results will be announced in the last week of February.